Govt rejects talks of an additional cess on GST to raise revenue to fight coronavirus
Some reports had alleged that the government was considering a cess over GST to generate additional revenue to compensate the economy hit by coronavirus pandemic.Updated: May 23, 2020 19:14 IST
Officials in the finance ministry have rejected speculations over the imposition of an additional calamity cess to generate financial resources to fight coronavirus pandemic and claimed the idea was antithetical to government efforts to provide relief to businesses, including tax related reliefs.
The officials in the finance ministry who didn’t wish to be named, categorically denied such a move, while dismissing stories in the media that claimed that the central government was considering a calamity cess on GST to tide over the economic crisis created by Covid-19 pandemic.
A cess is an additional tax that is levied in special circumstances to generate revenue for non-budgeted expenditures.
The officials said that in the present economic scenario during the Covid-19 pandemic, any proposal to introduce a calamity cess would itself create an adversity and be counter-productive to the government’s efforts to revive the economy.
Explaining the reasoning, the officials said that sales are already very low during the lockdown, which is being implemented in varying degrees across the country, and the Industry is already facing a deep crisis due to a lack of demand and the likely labour challenges that might manifest more acutely in the near future. Therefore, tinkering with the taxes or cess would not be a prudent option at all. They opined that an additional cess was likely to further dampen the consumers’ sentiments and could also weaken the markets’ strength, especially when the Government is pushing to boost consumption.
The officials added that experts have suggested that taxes and cesses should not be interfered with unduly in the present circumstances.
They added that according to the ministry’s understanding, such a measure may prove to be myopic and not result in any long-term gains.
A look at the well-established tax practices internationally and the responses by governments during the pandemic will reveal that such imprudent fiddling has not been tried in any tax regimes across the world, including those with the GST model, the officials said, before summing up that none of the countries, developed or developing, have increased taxes to counter economic impacts of Covid-19.
A few days ago, the finance ministry had to initiate disciplinary action against a group of senior officers who gone public with their suggestions to mop up revenue through several measures including hiking taxes for the super rich. The government had then clarified that it had neither authorised the group to come up with a proposal or given it permission to go public with it, a move, it said led to panic among the general public.